Five months ago, Anne called her attorney Robert, telling him that John had
filed a writ of summons and that someone just handed a copy of the writ to
her. Anne’s question: “Why is John bringing a lawsuit? Don’t John
and I have to arbitrate our dispute? Robert, you drafted the agreement and
you told me that it contained an arbitration provision.”
“Not to worry,” Robert confidently replied. “I cannot file what we call
a ‘preliminary objection’ to the writ of summons. Instead, I have to
wait. But I will be sure to respond as soon as John files a
complaint. This dispute will wind up in arbitration. Trust me.”
One month later, Anne called Robert. This time she said, “I just
received pre-complaint interrogatories and pre-complaint document
requests. Robert, remember I asked you about arbitration? Why is
John still pursuing this lawsuit?”
Robert’s response: “Stop worrying, I told you that I would respond at the
appropriate time. Send me the interrogatories and document requests.
I will deal with them.”
When he received the discovery requests, Robert went into action mode.
He moved to strike the discovery requests because, he contended, John failed to
satisfy the requirements for pre-complaint discovery. The Court did not
agree, however. It ruled that John had a right to pre-complaint discovery,
but – and this is what made Robert happy – struck most of the discovery
requests. When Robert called Anne, he told her merely to send him the few
documents that related to Anne’s business relationship with John. His
gloss: “I convinced the Court to throw out almost all of John’s discovery
requests.”
A few weeks after he produced the few documents, Robert received John’s
complaint. The complaint included a laundry list of all of the ways that
Anne had breached the agreement.
Once again, Robert went into action. He filed preliminary objections to
the complaint – failure to plead with sufficient specificity; failure to conform
to rule of court; and, most importantly, a motion to dismiss the complaint based
on an agreement for alternative dispute resolution, which was Exhibit “A” to the
very complaint that Robert was attacking. Robert’s brief started as
follows: “Pennsylvania courts as a
matter of public policy favor arbitration. Our courts favor settlement of
disputes by arbitration.” Robert cited Rule 1028(a)(6) of the Pennsylvania
Rules of Civil Procedure, which states that “[p]reliminary
objections may be filed by any party to any pleading and are limited to the
following grounds: . . . (6) pendency of a
prior action or agreement for alternative dispute resolution.”
How could he lose? Robert anticipated that the Court would sustain his
preliminary objection based on Rule 1028(a)(6); send the matter to arbitration;
and overrule as moot the remaining preliminary objections. If the matter
goes to arbitration, he mused, there surely is no need for the Court to consider
whether the Complaint is sufficiently specific or fails to conform to a rule of
Court.
Several weeks later, Robert received the Court’s order. The Court
concluded that the Complaint was not sufficiently specific and it directed John
to re-plead. But the Court refused to send the case to arbitration.
What happened here? Robert sought to dismiss the complaint, at the
earliest opportunity, by filing a preliminary objection based on Rule
1028(a)(6). What else could he have done? Anyway, what about the
“proposition” that courts like arbitration? Isn’t that “fundamental”?
Numerous Pennsylvania cases
have overruled preliminary objections where, as in Robert’s case, a litigant
“waived” his or her right to go to arbitration. These courts have found
waiver where a litigant failed to raise the arbitration issue promptly.
Hold on a minute – Robert did raise the arbitration issue promptly. He
could not have filed a preliminary objection before John filed his
complaint. In rejecting similar arguments that a preliminary objection to
a complaint is the earliest time to seek arbitration, however, Courts instead
have considered whether the party seeking arbitration “has availed itself of the
judicial process.” As in Robert’s case, a party so “avails itself” by
trying to win a favorable ruling from the trial court in connection with the
plaintiff’s attempt to get pre-complaint discovery.
What should Robert have done here? (Or, as Anne screamed, “how could
you screw this up?”) In GE Lancaster Investments v. American Express
Tax and Business Services, Inc., 920 A.2d 850
(Pa.Super. 2007), the Superior
Court answered this question. It stated that “no rule in the Pennsylvania
Rules of Civil Procedure requires a party to await the filing of a complaint
before filing a motion to compel arbitration.” (So much for waiting for
the complaint in order to file a preliminary objection.) It then said that
a party seeking to compel arbitration must act as soon as possible – even before
the filing of a complaint – and must take great pains not to pursue
litigation-type remedies and orders that could be viewed as accepting the
judicial process. Stated simply, a party should as soon as possible raise
the existence of an agreement to arbitrate either by preliminary objection or by
petition to compel arbitration.
By erroneously concluding that a preliminary objection was the only way to
compel arbitration, Robert lulled himself into an unwarranted delay. This
undermined his later attempt to dismiss John’s complaint. In future
instances where his client seeks arbitration on the basis of an arbitration
agreement, Robert will respond to a writ of summons by doing what he failed to
do for Anne – he will forthwith file a petition to compel arbitration, instead
of waiting to file a preliminary objection in response to the later-filed
complaint.
